Question

If ABC Corporation common stock has a beta of 1.75:

a. ABC common stock is more volatile than the market.
b. ABC common stock is less volatile than the market.
c. ABC common stock has the same volatility as the market.
d. ABC common stock has no volatility.

Answer 1

The beta of a stock measures its volatility in relation to the overall market. A beta greater than 1 indicates that the stock is more volatile than the market.Therefore, option a. ABC common stock is more volatile than the market is the correct answer.

Step-by-step explanation:

The beta of a stock measures its volatility in relation to the overall market. A beta of 1 indicates that the stock's price movements are expected to mirror that of the market. A beta greater than 1, such as the beta of 1.75 for ABC Corporation, indicates that the stock is more volatile than the market. Therefore, option a. ABC common stock is more volatile than the market is the correct answer.